An E&E Special Report

NEGOTIATIONS

U.S. pushes against Germany in looming decision to locate climate fund

Lisa Friedman, E&E reporter

ClimateWire: Tuesday, October 16, 2012

The United States is lobbying against Bonn, Germany, in its bid to become the headquarters for the Green Climate Fund, several delegates involved in the decision said this week.

Germany is among six nations jockeying to house the potentially multibillion-dollar fund, and Bonn is considered -- along with Songdo, South Korea, and Geneva, Switzerland -- a top contender.

But board members and activists said the Obama administration opposes Bonn because the city also is is home to the U.N. Framework Convention on Climate Change. While some view that as a plus, U.S. leaders worry that the UNFCCC would be too close for comfort, possibly influencing the new fund and likely dissuading Congress from putting money in it.

"I have been telling my friends from the U.S. that we should manage an institutional separation with a spatial proximity. We are very clear that the fund is not a subsidiary to the UNFCCC," said Manfred Konukiewitz, deputy director-general for climate policy in Germany's Federal Ministry for Economic Cooperation and Germany's board member on the Green Climate Fund.

Konukiewitz maintained that the United States is quietly backing South Korea's bid, largely for strategic diplomatic reasons.

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"I think in the end there are a number of very different concerns that play into the decision of my U.S. colleagues, like that Asia is a very important region for the U.S. right now," he said. "The U.S. government is very conscious of geopolitical issues."

Geopolitics at work

The United States has not publicly backed any candidate for the fund, and U.S. Treasury Department officials declined yesterday to speak about the upcoming decision. The 24-member board of the Green Climate Fund meets this week to choose the new home base.

It's a decision, observers said, that will reverberate beyond national pride for whichever city is chosen. Board members and climate activists said having strong government support, progressive leaders on climate finance and links to financial power structures could help make the Green Climate Fund into a powerful economic tool to help vulnerable countries.

Right now, the fund is an empty shell, but it is expected to manage much of a $100 billion annual pledge that nations vowed to raise from both public and private sources.

"The Green Climate Fund needs to do a lot of work as a thought leader, not just an entity that approves projects. We're looking at a new economic paradigm," said Farrukh Khan, who led the transition team that created the fund and now is an alternate board member from Pakistan.

"It's heartening to see how much interest the Green Climate Fund has," Khan said.

Also competing to host the fund are Warsaw, Poland; Mexico; and Namibia. Observers said Namibia is likely to have problems attracting staff; Poland is trying to establish itself as an Eastern European financial center but has earned enmity among climate activists for blocking the European Union's emissions reduction efforts; and Mexico remains a strong dark-horse contender.

Asian countries line up behind South Korea

Mexico, in fact, created the very idea of the Green Climate Fund and shopped it around in the months before the 2010 climate summit in Cancun. Yet, board members said, Mexico gave a weak presentation at the previous Green Climate Fund meeting. Geneva, meanwhile, has the allure of its financial markets and proximity to several U.N. agencies, yet is criticized as too expensive a city.

Hong-Sang Jung, director-general for economic cooperation in South Korea's Ministry of Finance, said his country, which just 50 years ago was one of the world's poorest, is both leading on climate change and uniquely qualified to bridge the developed and developing world.

"If we locate in Bonn or Geneva, the Green Climate Fund will become another European and developed-country institution," Jung said. "Now, if we locate the GCF in a less-represented region, it can make a big momentum."

This is South Korea's second attempt in two years to make a name for itself in the world of climate change. It lost a hard-fought bid against Qatar to host the 2012 U.N. climate summit. Now, though, it is said to have backing for the Green Climate Fund of many Asian countries that supported Qatar for the conference. South Korea has taken a voluntary emissions target and has established an institute aimed at developing strategies for low-carbon growth.

Jung declined to comment on U.S. support for South Korea's bid but noted that he agrees with U.S. concerns that Bonn is "too close to the UNFCCC."

Europe is split

Europeans, meanwhile, are split among Bonn, Geneva and Warsaw. But those backing Bonn have criticized delays in South Korea's efforts to turn the Global Green Growth Institute into an international body and have questioned whether South Korea can attract the necessary international staff.

They also have cast U.S. opposition to the city as part of a cynical effort to undermine the Green Climate Fund. European sources close to the board decision argued that the United States not only wants distance from the United Nations but also wants to avoid a fund that mirrors the United Nations' one-party, one-vote system to give donors more weight. They characterized the U.S. effort as against the interests of developing countries affected by climate change and the European Union.

U.S. officials rejected that characterization. Billy Pizer, former deputy assistant secretary for environment and energy at the U.S. Treasury Department, argued that in order to be successful, the Green Climate Fund needs a financial and accountability structure that is fundamentally different than what currently exists within the U.N. system. Besides, he said, the reality is simply that Congress is unlikely to put taxpayer dollars into a fund closely aligned with the United Nations.

"The U.S. wants this to be a strong fund, and a strong fund means a fund that is not too associated with other international organizations that Congress has at time shown they have a lot of issues with," Pizer said.

South Korea, which is hosting the Oct. 18-20 board meeting, has the home turf advantage. Members will vote by closed ballot, eliminating the candidate with the least votes until a winner emerges.